Welcome to 2017: Time for a reality check

UK Prime Minister Theresa May delivered her long-awaited (?) Brexit speech yesterday. I say “long-awaited” because, for a while there, people were starting to complain that May had offered no guidance as to how her government would approach exit talks with the European Union, to the point where she had to deny earlier this month that her messaging on the topic had been “muddled.” That things got to the point where she had to deny this in itself suggests that she hasn’t been very clear, and it didn’t help that she denied muddling the Brexit debate in a way that…further muddled the Brexit debate. In her denial, see, she pointedly noted that the UK would not be keeping “bits and pieces of EU membership.” To people for whom words have meaning, this meant that May was going after a so-called “hard Brexit,” or total break between the UK and the EU rather than some kind of halfway measure. OK, that’s some clarity…except that, when the pound tanked in reaction, May quickly seemed to back off of her remarks and said that a “hard Brexit” isn’t “inevitable.” So, yes, muddled.

Then came yesterday’s speech, and lo and behold, “hard Brexit” it is:

That truly global Britain will feature, if May has her way, stricter border control, and will have to renegotiate its trading relationship with Europe. She explained that the U.K. would make no attempt to remain in the European single market because that would mean accepting so many conditions from Brussels that “It would to all intents and purposes mean not leaving the EU at all.”

Instead, May wants to reach a separate trade deal with Europe and with other countries around the world; President-elect Donald Trump said in an interview published in The Times (English edition) on Saturday that he will do a deal with Britain.

“Theresa May has promised a ‘clean Brexit’,” Joseph Dobbs, a research fellow at the European Leadership Network, told Foreign Policy. “But given that she has just promised voters in the U.K. an excellent free trade deal with Europe with no trade-offs, my bet is that it will be anything but clean.” That will be bad news for the British economy next year, after Brexit got a relatively benign reception in markets. “2017: Like 2016, but now with consequences,” Dobbs said.

The pound bounced up yesterday after May suggested that she’ll let parliament have a vote on Brexit before it’s all finalized, but the bounce was likely due to the market’s unrealistic hopes that parliament will force May to make a “soft Brexit” instead, to accept some EU regulations in exchange for continued UK access to the single market.

It should be noted, of course, that May’s “hard Brexit” stance could be a negotiating ploy, that she may well compromise on a softer Brexit but needs to take the hardest possible line now in order to maximize her leverage with Brussels. But this is where we get to the “reality check” portion of our show. May, and many other pro-Brexit British politicians, seem to be operating on the assumption that all the leverage in the upcoming Brexit talks rests with London. They seem to think that they can leave the EU but then negotiate a new deal with Brussels that puts back all the things about EU membership that benefit the UK (trade, primarily) while leaving out all the things about EU membership they don’t want (regulations and, especially, free movement of EU citizens). And, uh, I think they may be in for a rude awakening. It is the case that the UK has some leverage, simply because it is a fairly large economy (somewhere in the top 30 in GDP/capita) with which Germany runs a trade surplus). EU countries that already have large numbers of nationals living and working in the UK will want to see them protected, so that’s leverage as well. But the UK also exports vastly more stuff to EU member states than to anybody else, so it’s not like London can just tell Brussels to go fuck itself if the negotiations on a new trade deal get too rough. And there are plenty of UK residents living and working on the continent whose protection London would like to secure.

Once you get past the economic aspects of the deal and into the politics, it gets worse for London. The EU is a large institution that took decades to build and whose leaders, obviously, would like to see it continue to exist. You may agree or disagree with the EU’s usefulness–I’m not a fan of the common currency, but to the extent that the EU helps prevent Europe from drawing the rest of us into World War III I think it’s a worthwhile institution–but there’s no doubt that the people running it are going to fight to preserve it. And if Brussels allows the UK to leave the EU and then come back and negotiate a sweetheart deal that gives them everything they want, then you might as well hang a “going out of business” sign on the door to the EU parliament chambers. Every major EU member that isn’t Germany will be running for the exits. Moreover, there’s a financial reason why the EU will want to take a hard line, which is that London’s status as the banking capital of Europe is now up for grabs. Major banks are already talking about moving operations to cities on the continent, and while I guess it’s possible that the EU will negotiate some kind of special arrangement just with the city of London in order to preserve financial stability, this seems like a long shot when there’s potentially trillions of euros worth of business that Paris and/or Berlin could bring their way.

There is every reason to expect that EU negotiators will take an equally hard line in Brexit negotiations as May and her negotiators will, and frankly it’s not clear to me why anybody should expect the EU to blink first. This is why, today, you have EU officials praising May’s speech for its “clarity,” but for several days now you’ve also had anonymous EU officials talking down the possibility of a happy outcome to the talks, and on-the-record EU officials talking about how “difficult” the talks will probably be.

May is also going to be hamstrung back home, where a hard Brexit looks like it will revive talk of Scottish independence and will make an utter hash out of the already chaotic political situation in Northern Ireland. And even if the EU is inclined to be conciliatory, even if Donald Trump has offered to be quick to swoop in with a trade deal, the UK isn’t going to be able to negotiate trade deals with anybody until it’s completely out of the EU, which is still a couple of years away. And then it will almost certainly take several years for London to negotiate all these wonderful new trade deals, because trade deals always take years to negotiate even under the best of circumstances. In the meantime, the British economy will suffer. May’s finance minister, Philip Hammond, suggested over the weekend that the UK could cut corporate taxes to make it a more attractive place for businesses, but it’s not at all clear that it can cut taxes enough to make up for the big corporate advantage it’s going to be giving up–total access to the European market.

I suspect there are some Very Important People in the UK who are about to learn that the British Empire is a thing of the past and that they no longer live in The, or even An, Indispensable Nation. And I think the same thing is true of the United States. The Bush and Obama years have not been particularly kind to the idea of American Leadership–countries in East Asia that were once firmly in the American orbit are starting to make nicer with Beijing, China is asserting itself all across Asia and especially in Africa, and it’s challenging some fundamental aspects of Western geopolitical hegemony. The Trump administration looks set to drastically erode US-China relations, to undercut American leadership on big issues like climate change, to subordinate itself to Russian policy whenever there’s overlap, and if it follows some of Trump’s worst impulses–wrecking the Iran nuclear deal, for example, pulling out of NATO, or defaulting on US debt–it may quickly find the world adjusting to a new reality where the United States isn’t nearly as relevant as it used to be.

Hi, how’s it going? Thanks for reading; attwiw wouldn’t exist without you! If you enjoyed this or any other posts here, please share widely and help build our audience. You can like this site on Facebook or follow me on Twitter as well. Most critically, if you’re a regular reader I hope you’ll read this and consider helping this place to stay alive.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.